ANNUAL REPORT 2005 - Lukoil

FINANCIAL ACCOUNTS
The Company's net profits were 66,327 million Russian rubles, 78,028 million Russian rubles and 48,042 million Russian
rubles, respectively for 2005, 2004 and 2003, pursuant to the statutory financial statements, which at the US dollar
exchange rates as of December 31, 2005, 2004 and 2003 amounted to $2,304 million, $2,812 million and $1,631 million,
respectively.
At the annual stockholders' meeting on June 28, 2005, dividends were declared for 2004 in the amount of 28.00 Russian
rubles per common share, which at the date of the decision was equivalent to $0.98.
At the annual stockholders' meeting on June 24, 2004, dividends were declared for 2003 in the amount of 24.00 Russian
rubles per common share, which at the date of the meeting was equivalent to $0.83.
At the annual stockholders' meeting on June 26, 2003, dividends were declared for 2002 in the amount of 19.50 Russian
rubles per common share, which at the date of the decision was equivalent to $0.64.
Earnings per share
The calculation of diluted earnings per share for these years was as follows:
Year ended
December 31, 2005
Year ended
December 31, 2004
Year ended
December 31, 2003
Income before cumulative effect of change
in accounting principle 6,443 4,248 3,569
Cumulative effect of change in accounting
principle - - 132
Net income 6,443 4,248 3,701
Add back convertible debt interest
(net of tax at effective rate)
1% Convertible US dollar bonds,
maturing 2003 - - 13
3.5% Convertible US dollar bonds,
maturing 2007 26 27 27
Total diluted income before cumulative
effect of change in accounting principle 6,469 4,275 3,609
Total diluted net income 6,469 4,275 3,741
Weighted average number of outstanding
common shares (thousands of shares) 814,417 817,294 819,169
Add back treasury shares held in respect of
convertible debt (thousands of shares) 15,957 16,847 20,977
Weighted average number of outstanding
common shares, after dilution
(thousands of shares) 830,374 834,141 840,146
NOTE 16. FINANCIAL AND DERIVATIVE INSTRUMENTS
Commodity derivative instruments
The Group uses derivative instruments in its international petroleum products marketing and trading operations. The
types of derivative instruments used include futures and swap contracts, used for hedging purposes, and purchase
and sale contracts that qualify as derivative instruments. The Group maintains a system of controls over these activities
that includes policies covering the authorization, reporting and monitoring of derivative activity. The Group recognized
an expense from the use of derivative instruments of $171 million, $55 million and $37 million during 2005, 2004
and 2003, respectively. The expense is included in "Cost of purchased crude oil, petroleum and chemical products" in
the consolidated statements of income. The fair value of derivative contracts outstanding and recorded on the consolidated
balance sheets was a net liability of $26 million and a net asset of $28 million as of December 31, 2005 and
2004, respectively.
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